Retail Digital Transformation Continues In The Wake Of Amazon's Arrival

At the recent MagentoLive event, I chatted to several people about the big changes coming in retail systems technology and the impact of Amazon on the Australian market. A number of interesting insights were shared by companies that were exhibiting at the event showcase as well as Magento's CEO, Mark Lavelle.

Lavelle says digital transformation continues to be a major thrust.

"We see in almost every industry companies, governments, education and finance creating digital first strategies about where they're going to go in the future. that's number one," he said.

Digital has moved from an "on the side" project or program, said Lavelle, to one where boards and the C-suite are actively engaged. And while in B2C, that's been happening for some time, he sees it accelerating in the last three or four years in other sectors. In particular, businesses going directly to consumers, bypassing some tractional retail channels, is becoming more prevalent.

The prevalence of always-on fast internet connection, device proliferation, big data and globalisation has driven businesses to an understanding that we no longer give our attention to the same things we used to. We make many decisions from screens at all hours. This has driven marketers to change how they approach potential customers.

"This begins a new challenge to brands to engage these customers," said Lavelle.

Dealing with these challenges are the "next frontier", said Lavelle. It comes down to making sure you are consistently engaging in all the channels where the customer is, that you can track that activity and looking at how do you create offers that are unique, not just to the customer but also where they are. That means customising what gets to the customer depending on whether they are in store, using Instagram or in some other context.

Now that digital transformation is a reality and many businesses are well into their digital transformation programs, the question shifts to one of readiness to take on the new retail world. And, in Australia, that means being ready to deal with the arrival of Amazon.

Contrary to what was expected when Amazon opened its local online store last year, local stores did not melt down and disappear as the retail juggernaut roared into town. Rather, as we heard from several exhibitors at the event showcase, Amazon's impact has been far less extreme. The reality is that much of what is listed in Amazon's local inventory is coming from parties that use Amazon as a new retail channel - just as they use Ebay, Catch Marketplace and social media channels. It has become, simply, another shopfront amongst many.

With the internet giving customers access to what Lavelle calls "unlimited inventory", some of the people I spoke with noted that the time to bring new online features is getting shorter and shorter. Customers want their good and services faster, through a slicker online experience which means a big part of what retailers need to do is to the use the existing platforms better.

One system integrator I spoke with said a challenge with some retailers is that there is still a perception that online sales are "stealing" from their traditional channels - particularly bricks-and-mortar store. That"old school" mentality is fading but still exists.

When it comes to Amazon, there are two factors that will have great impact, once Amazon has them in place.

The first is the establishment of their own retail presence and logistics. At the moment, the vast majority of what we see when we log onto Amazon Australia is local retailers using Amazon as a channel. Once Amazon starts to bring products in themselves, we can expect to see pressure on prices.

Furthermore, Amazon's big advantage has never been purely their prices. The ability to ship products to people quickly has been one of their main attractions. When Amazon Prime launches here, it will give local retailers a big push to get their logistics houses in order if they haven't already done so.

"Each organisation has to come to grips with the reality of massively efficient order fulfilment," said Lavelle.

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